The Financial Reporting Council has launched its latest salvo into the audit choice debate. The response? A distinct lack of enthusiasm.

The FRC, which wants to open up the ownership of firms, set out its views on the subject earlier this month. But the firms are not overwhelmed.

‘Lack of capital is not the most important obstacle to audit network expansion,’ said Jan Babiak, Ernst & Young’s managing partner for regulatory and public policy.

There are issues with outside owners too, she says.

‘The current rules on ownership were designed to ensure that audit firms remain truly independent from the companies they audit.

‘Paradoxically, auditor independence rules will either discourage investors from investing in audit firms or disqualify audit firms from auditing many of the companies they target. The more diverse the ownership, the smaller and more constricted the audit market for that firm will become,’ Babiak said.

Others argue that new owners could even pose a threat to quality.

‘We are owner-operated and have severe restrictions on our ability to invest in clients or have other business interests because we have to be independent of their wishes. Once we relinquish this ownership, they will wish to influence the way you behave and this is something we have to be careful of in the audit service, which, by nature, has to be independent of those it is serving,’ said Richard Sexton, PricewaterhouseCooper’s head of assurance.

‘This really is a question for the mid-tiers to consider, whether they welcome the availability of additional funding in this way. I’m not sure such funding will encourage new entrants,’ he added.

The mid-tier firms do not appear concerned with independence issues. They ma intain that capital is not an obstacle to their growth, but they’re open to investment, provided there is a demand for their services from larger corporations.

Grant Thornton’s head of professional affairs, Steve Maslin, said that it was common in their experience to find that, while senior boards had no issue with the services outside of the Big Four, it was frequently people on the ground who appeared to be more dictated by a choice for a Big Four firm.

Whether outside ownership will prove the key move in cracking the audit choice nut seems to be a moot point: investors say at least it might help to recapitalise a collapsed firm.

The thing that is really sticking in the mid-tier’s craw are the agreements ­ both contractual and otherwise ­ that limit auditor choice to a Big Four firm.

The mid-tier has called for the FRC to stop being so shy about compelling companies to disclose such arrangements from banks or others. Perhaps a report on that would be more warmly welcomed.